Don’t Claim Social Security at 62 Unless You Know This Number
There’s a reason so many seniors are tempted to claim Social Security at 62. That’s the earliest age you can get retirement benefits.
But there’s a catch. If you want those monthly checks without a reduction, you’ll have to wait until full retirement age (FRA) arrives to sign up for Social Security. If you were born in 1960 or later, that happens at 67.
You can also delay your Social Security claim for larger monthly benefits. Each year you wait beyond FRA give those payments an 8% boost for life.
In some cases, claiming Social Security at 62 makes sense beyond the reduction. But it’s important to understand what the decision really means financially.
It’s not just a matter of smaller monthly checks
If you claim Social Security at 62, your monthly benefits will be about 30% smaller than they would be at FRA. So if you’re eligible for $2,000 a month at age 67, filing at 62 means you’re only looking at about $1,400 a month. On an annual basis, that’s $7,200 less.
But while you may be aware of that math, it’s also important to calculate the potential lifetime math.
Remember, you might collect Social Security for 20 years or more. If you live a pretty average lifespan, filing at 62 could mean shorting yourself not just on monthly Social Security income, but total income.
Let’s imagine you’re eligible for $2,000 a month in Social Security at 67, but you file at 62. If you live until age 83, which is roughly the average life expectancy for a 65-year-old male today, per the Social Security Administration, it means that by filing at 62, your total lifetime paycheck amounts to $352,800.
However, with a lifespan of 83, filing for benefits at 67 would give you a total of $384,000 in Social Security. So by filing at 62, you’re potentially giving up $31,200 in lifetime benefits.
The math works out even less in your favor when you consider what a delayed claim could do for you. Waiting until 70 in this situation raises your monthly benefit to $2,480. If you live until 83, you’ll collect a total of $386,800 — which is $2,880 more than your lifetime total compared to filing at 67.
Now that $2,880 isn’t such a huge difference. But the difference between filing for Social Security at 62 versus 67, which is $31,200, is a lot more substantial.
Do the math before you file
It can be tempting to claim Social Security once that money becomes available to you. And if you have a job that stresses you out and you’re eager to quit, those benefits could be your ticket to instant retirement.
If you have poor health and are unlikely to live a long life, filing for Social Security at 62 could work out in your favor financially. But if that’s not the case, you could get shortchanged on lifetime income by taking benefits as early as possible.
Running the numbers will help you understand exactly what you might be giving up so you can make a more informed claiming decision.
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